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Twenty years after the completion of the EU’s single market programme, member states have still not eliminated all barriers to trade. by Blog Admin
The single market programme, launched by the European Commission in a 1985 white paper, put 1992 as a deadline for the completion of the single market. As Michelle Egan writes, twenty years on from the original 1992 deadline there still remain significant regulatory barriers between member states. While the Commission has proposed a number of new reforms to deepen the single market, the reforms will only be effective if they are fully embraced by member states.
EU summits always acclaim the virtues of the single market; yet the publication of a new single market proposal last month made f ew headlines across Europe. Although the EU is celebrating the twentieth anniversary of the “1992″ single market program, with a number of public events across Europe, the lack of enthusiasm or endorsement f or current ef f orts to address the remaining barriers in Europe is striking. It may be that European leaders pushed into collective action by the sovereign debt crisis have been reluctant to push f or more Europe at a time of “integration f atigue.” But in advancing an agenda f or boosting cross-border activity, the European Commission, the EU’s executive arm, has targeted energy, digital, and transport sectors as priorities f or deepening market integration. They f ace an uphill battle as the ref orm proposals, which come two years af ter a sweeping report on the state of the single market by Former Commissioner and now Italian Premier Mario Monti, provide a mixed bag of initiatives that lack the strategic ambition of the “1992″ legislative program.
The European Commission will struggle to implement its single market plans by the proposed deadline at the end of 2014 f or a number of reasons. First, they have proposed a long list of proposals bundled together. Opening up energy, transportation, digital and business services may yield important gains. It is unclear what impact social entrepreneurship will have on business growth, productivity, and employment creation. Second, trying to boost consumer conf idence with initiatives such as passenger rights and transparency of banking f ees is laudable in itself , but during a period of Cre d it: Staxne t (Cre ative Co mmo ns BY NC SA) economic recession and high unemployment, consumer protection is not social cohesion. Job creation matters more. Third, as the euro crisis has escalated, member states are implementing major structural ref orms and austerity measures, making it harder to push f or more single market. With increased f rustration and protest at the terms and conditions imposed, extremist parties as well as domestic public opinion have tempered support f or unity and solidarity. All of this makes the case f or more Europe dif f icult.
The world economy has changed signif icantly over the past twenty years with technology and innovation becoming more crucial elements in f ostering competitiveness and growth. European companies f ace some real constraints if they want to leverage the single market to compete globally. There are a number of obstacles that still need to be addressed to improve the business environment and restore investor conf idence. For Europe to address its economic challenges, it needs to f ocus on the single market f or services, as a means of addressing the productivity gap with the US, and realizing the untapped potential of its greatest asset. Services remain hampered by divergent country specif ic rules, whether it is special licenses, prof essional qualif ications, or constraints on use of home country inputs. The implementation of the services directive has only been partially successf ul. E-commerce is hindered by divergent rules on data privacy, consumer protection and on-line service provisions. A digital single market would yield substantial gains. Take e-books, f or example, where dif f erent platf orms and taxes result in electronic book sales of only 1 per cent compared to 31 per cent in the US. Copenhagen Economics have estimated the anticipated benef its f rom deepening the single market at 1 per cent of GDP.
Some progress has been made. A single European patent process can slash costs and improve innovation. Recent agreement on a unitary patent court – to be based in three locations no less – is a crucial f irst step towards addressing the growing gap with China, US, Japan and Korea in terms of patents granted. But two issues are important to ensure that the single market delivers its potential and regains overall public support. The f irst issue is enf orcement of single market rules. Business has repeatedly expressed concern that single market rules need to work better in practice. In a 2011 poll 55 per cent of companies indicated they f ace high administrative barriers and 39 per cent perceived some discrimination against f oreign businesses. Greater attention must be given to addressing business and consumer complaints through alternative dispute resolution mechanisms rather than f ormal litigation. The inf ringement cases heard bef ore the European Court of Justice capture only a f raction of the barriers encountered in the single market, since many f irms may pref er to avoid costly litigation f or f ear of the impact on their export markets.
The second issue is the need to address concerns of citizens and workers about the reduction of social rights. The single market proposals need to demonstrate more clearly the impact on growth, employment and social cohesion to deepen public support and legitimacy. The European Commission has shelved discussions on the relationship between social rights and market f reedoms. While this has ‘revived an old split that had never been healed’ between the clarif ication of worker rights in cross-border situations and the exercise of f reedom of establishment and right to provide services, the continuing legal uncertainty is problematic f or the single market.
Anniversaries are meant to be important celebrations. Brussels may create a raf t of measures to deepen the single market but member states need to move beyond empty rhetorical support. Much of the legislation is already in place. But it needs to be implemented in a common and consistent manner to improve the overall business and investment environment. If the conditional political and f inancial support f or the euro area through agreements on supervisory mechanisms at the recent EU summit revealed the two-tier nature of Europe between the ins and outs, the single market proposals should be seen as the means to bridge the divisions that are emerging over budgets, banking and bailouts among member states. Monti’s recent remarks about the ‘potential disintegration’ of the single market under the pressures of the eurozone crisis should be a warning that dif f erent f acets of the single market still need to be addressed by all 27 member states.
Note: This article gives the views of the author, and not the position of EUROPP – European Politics and Policy, nor of the London School of Economics.
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About the author
Michelle Egan – American University Michelle Egan is an Associate Prof essor at the School of International Service in the American University, Washington D.C and SIS Policy Scholar f ocusing on European political economy. Related posts:
1. Anglo-Dutch Cooperation continues to be important, especially in unlocking the f ull potential of the EU’s single market (12.2) 2. The past twenty years have seen global regulatory leadership shif t f rom the United States to the European Union. (13.4) 3. Europe’s prosperity is not to be built via political declarations and never-ending summits. Promoting f ree, f air and open international trade and removing the remaining barriers to an ef f ective single market in Europe are key f or f uture growth (19.4)